“Without A Revolution, Americans Are History.”

The United States is running out of
time to get its budget and trade deficits under control. 
Despite the urgency of the situation, 2010 has been
wasted in hype about a non-existent recovery.  As
recently as August 2 Treasury Secretary Timothy F.
Geithner penned a
New York Times

Welcome to the

As John Williams (shadowstats.com)
has made clear on many occasions, an appearance of
recovery was created by over-counting employment and
undercounting inflation. Warnings by Williams, Gerald
Celente, and myself have gone unheeded, but our warnings
recently had echoes from Boston University professor

Laurence Kotlikoff
and from

David Stockman
, who excoriated the Republican Party
for becoming big-spending Democrats.

It is encouraging to see a bit of
realization that, this time, Washington cannot spend the
economy out of recession. The deficits are already too
large for the dollar to survive as reserve currency, and
deficit spending cannot put Americans back to work in
jobs that have been moved offshore. 

However, the solutions offered by
those who are beginning to recognize that there is a
problem are discouraging. Kotlikoff thinks the solution
is massive Social Security and Medicare cuts or massive
tax increases or hyperinflation to destroy the massive

Perhaps economists lack
imagination, or perhaps they don`t want to be cut off
from Wall Street and corporate subsidies, but Social
Security and Medicare are insufficient at their present
levels, especially considering the erosion of private
pensions by the dot com, derivative and real estate
bubbles. Cuts in Social Security and Medicare, for which
people have paid 15% of their earnings all their life,
would result in starvation and deaths from curable

Tax increases make even less sense.
It is widely acknowledged that the majority of
households cannot survive on one job. Both husband and
wife work and often one of the partners has two jobs in
order to make ends meet. Raising taxes makes it harder
to make ends meet—thus more foreclosures, more food
stamps, more homelessness. What kind of economist or
humane person thinks this is a solution?

Ah, but we will tax the rich. The
usual idiocy. The rich have enough money. They will
simply stop earning.

Let`s get real.  Here is what
the government is likely to do.  Once the
Washington idiots realize that the dollar is at risk and
that they can no longer finance their wars by borrowing
abroad, the government will either levy a tax on private
pensions on the grounds that the pensions have
accumulated tax-deferred, or the government will require
pension fund managers to purchase Treasury debt with our
pensions. This will buy the government a bit more time
while pension accounts are loaded up with worthless

The last Bush budget deficit (2008)
was in the $400-500 billion range, about the size of the
Chinese, Japanese, and OPEC trade surpluses with the US.
Traditionally, these trade surpluses have been recycled
to the US and finance the federal budget deficit. In
2009 and 2010 the federal deficit jumped to $1,400
billion, a back-to-back trillion dollar increase. There
are not sufficient trade surpluses to finance a deficit
this large. From where comes the money?

The answer is from individuals
fleeing the stock market into
Treasury bonds and from the bankster bailout, not so
much the TARP money as the Federal Reserve`s exchange of
bank reserves for questionable financial paper such as
subprime derivatives. The banks used their excess
reserves to purchase Treasury debt.

These financing maneuvers are
one-time tricks. Once people have fled stocks, that
movement into Treasuries is over. The opposition to the
bankster bailout likely precludes another. So where does
the money come from the next time?

The Treasury was able to unload a
lot of debt thanks to
Greek crisis
which the New York banksters and hedge funds multiplied
into "the euro
The financial press served as a financing
arm for the US Treasury by creating panic about European
debt and the euro. Central banks and individuals who had
taken refuge from the dollar in euros were panicked out
of their euros, and they rushed into dollars by
purchasing US Treasury debt. 

This movement from euros to dollars
weakened the alternative reserve currency to the dollar,
halted the dollar`s decline, and financed the massive US
budget deficit a while longer.

Possibly the game can be replayed
with Spanish debt, Irish debt, and whatever unlucky
country swept in by the thoughtless expansion of the
European Union.

But when no countries remain that
can be destabilized by Wall Street investment banksters
and hedge funds, what then finances the US budget

The only remaining financier is the
Federal Reserve. When Treasury bonds brought to auction
do not sell, the Federal Reserve must purchase them. The
Federal Reserve purchases the bonds by creating new
demand deposits, or checking accounts, for the Treasury.
As the Treasury spends the proceeds of the new debt
sales, the US money supply expands by the amount of the
Federal Reserve`s purchase of Treasury debt.

Do goods and services expand by the
same amount?  Imports will increase as US jobs have
been offshored and given to foreigners, thus worsening
the trade deficit.  When the Federal Reserve
purchases the Treasury`s new debt issues, the money
supply will increase by more than the supply of
domestically produced goods and services. Prices are
likely to rise.

How high will they rise? The longer
money is created in order that government can pay its
bills, the more likely hyperinflation will be the

The economy has not recovered. By
the end of this year it will be obvious that the
collapsing economy means a larger than $1.4 trillion
budget deficit to finance. Will it be $2 trillion?

Whatever the size, the rest of the
world will see that the dollar is being printed in such
quantities that it cannot serve as reserve currency. At
that point wholesale dumping of dollars will result as
foreign central banks try to unload a worthless

The collapse of the dollar will
drive up the prices of imports and offshored goods on
which Americans are dependent. Wal-Mart shoppers will
think they have mistakenly gone into Neiman Marcus. 

Domestic prices will also explode
as a growing money supply chases the supply of goods and
services still made in America by Americans.

The dollar as reserve currency
cannot survive the conflagration. When the dollar goes
the US cannot finance its trade deficit. Therefore,
imports will fall sharply, thus adding to domestic
inflation and, as the US is energy import-dependent,
there will be transportation disruptions that will
disrupt work and grocery store deliveries.

Panic will be the order of the day.

Will farms will be raided? Will
those trapped in cities resort to riots and looting?

Is this the likely future that
"our" government and "our
corporations have created for us?

To borrow from Lenin,
"What can be

Here is what can be done. The wars,
which benefit no one but the military-security complex
and Israel`s territorial expansion, can be immediately
ended. This would reduce the US budget deficit by
hundreds of billions of dollars per year.  More
hundreds of billions of dollars could be saved by
cutting the rest of the military budget, which in its
present size, exceeds the budgets of all the serious
military powers on earth combined. 

US military spending reflects the
unaffordable and unattainable crazed

  goal of US Empire and world
hegemony. What fool in Washington thinks that China is
going to finance US hegemony over China? 

The only way that the US will again
have an economy is by bringing back the offshored jobs.
The loss of these jobs impoverished Americans while
producing over-sized gains for Wall Street,
shareholders, and corporate executives. These jobs can
be brought home where they belong by taxing corporations
according to where value is added to their product. If
value is added to their goods and services in China,
corporations would have a high tax rate. If value is
added to their goods and services in the US,
corporations would have a low tax rate.

This change in corporate taxation
would offset the cheap foreign labor that has sucked
jobs out of America, and it would rebuild the ladders of
upward mobility that made America an opportunity

If the wars are not immediately
stopped and the jobs brought back to America, the US is
relegated to the trash bin of history.

Obviously, the corporations and
Wall Street would use their financial power and campaign
contributions to block any legislation that would reduce
short-term earnings and bonuses by bringing jobs back to
Americans. Americans have no greater enemies than Wall
Street and the

corporations and their prostitutes
in Congress and
the White House.

The neocons allied with

, who control both parties and much of the
media, are strung out on the ecstasy of Empire. 

The United States and the welfare
of its 300 million people cannot be restored unless the
neocons, Wall Street, the corporations, and their
servile slaves in Congress and the White House can be

Without a revolution, Americans are

Paul Craig Roberts

was Assistant Secretary of the Treasury during
President Reagan`s first term.  He was Associate
Editor of the
Wall Street Journal.  He has
held numerous academic appointments, including the
William E. Simon Chair, Center for Strategic and
International Studies, Georgetown University, and Senior
Research Fellow, Hoover Institution, Stanford
University. He was awarded the Legion of Honor by French
President Francois Mitterrand. He is the author of

Supply-Side Revolution : An Insider`s Account of
Policymaking in Washington
and the Soviet Economy


Meltdown: Inside the Soviet Economy
and is the co-author with Lawrence M. Stratton of

The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
of Justice
. Click


for Peter Brimelow`s
Forbes Magazine
interview with Roberts about the recent epidemic of
prosecutorial misconduct.